Tuesday, June 16, 2015

Amid comparisons to “shuffling the deck chairs” on the Titanic, the City Council’s Finance Committee agreed Monday to add another $1.1 billion to the mountain of debt piled on Chicago taxpayers after aldermen were warned the city’s junk bond rating demanded it.

When its bond rating dropped below investment grade, Chicago could have faced paying nearly $2.2 billion to bankers under a series of complex deals dating back to former Mayor Richard M. Daley’s tenure.

The city has already eliminated roughly half that risk by converting $918 million in variable rate debt to fixed interest rates and by terminating 21 “swap” agreements. The other half was still outstanding, and therein lies the risk.

“We are technically in default…There would be the potential that we would have to come up with close to $900 million to pay back the banks if we did not execute this transaction,” newly-appointed Chief Financial Officer Carole Brown told the Finance Committee.

There's more:

The senior managing underwriter on the $1.1 billion borrowing with an estimated $2.64 million in fees is Morgan Stanley. The company’s affidavit was signed by William Daley Jr., whose uncle is the former mayor and whose father and namesake replaced Rahm Emanuel as White House chief of staff.

That not only raised eyebrows among black and Hispanic aldermen demanding a bigger seat on the gravy train tied to city bond issues.